Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards ShockWave Medical, Inc. (NASDAQ:SWAV) to find out whether there were any major changes in hedge funds’ views.
ShockWave Medical, Inc. (NASDAQ:SWAV) was in 27 hedge funds’ portfolios at the end of June. The all time high for this statistic was previously 22. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. SWAV has seen an increase in hedge fund sentiment lately. There were 17 hedge funds in our database with SWAV holdings at the end of March. Our calculations also showed that SWAV isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Brad Farber of Atika Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let’s take a glance at the new hedge fund action regarding ShockWave Medical, Inc. (NASDAQ:SWAV).
Do Hedge Funds Think SWAV Is A Good Stock To Buy Now?
At Q2’s end, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 59% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in SWAV over the last 24 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Rock Springs Capital Management, managed by Kris Jenner, Gordon Bussard, Graham McPhail, holds the most valuable position in ShockWave Medical, Inc. (NASDAQ:SWAV). Rock Springs Capital Management has a $41.7 million position in the stock, comprising 0.8% of its 13F portfolio. The second most bullish fund manager is D. E. Shaw of D E Shaw, with a $38.8 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other professional money managers with similar optimism include Brad Farber’s Atika Capital, Renaissance Technologies and Richard Driehaus’s Driehaus Capital. In terms of the portfolio weights assigned to each position Atika Capital allocated the biggest weight to ShockWave Medical, Inc. (NASDAQ:SWAV), around 1.82% of its 13F portfolio. Rock Springs Capital Management is also relatively very bullish on the stock, setting aside 0.82 percent of its 13F equity portfolio to SWAV.
As one would reasonably expect, specific money managers were leading the bulls’ herd. Renaissance Technologies established the largest position in ShockWave Medical, Inc. (NASDAQ:SWAV). Renaissance Technologies had $19.3 million invested in the company at the end of the quarter. Richard Driehaus’s Driehaus Capital also made a $18.5 million investment in the stock during the quarter. The other funds with brand new SWAV positions are Ray Dalio’s Bridgewater Associates, Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management, and Jinghua Yan’s TwinBeech Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as ShockWave Medical, Inc. (NASDAQ:SWAV) but similarly valued. These stocks are Tetra Tech, Inc. (NASDAQ:TTEK), Choice Hotels International, Inc. (NYSE:CHH), SLM Corp (NASDAQ:SLM), Redfin Corporation (NASDAQ:RDFN), BRP Inc. (NASDAQ:DOOO), Eastgroup Properties Inc (NYSE:EGP), and Stericycle Inc (NASDAQ:SRCL). This group of stocks’ market values match SWAV’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TTEK | 25 | 134924 | 2 |
| CHH | 15 | 153051 | -2 |
| SLM | 27 | 1091304 | 0 |
| RDFN | 17 | 572133 | -1 |
| DOOO | 19 | 175828 | 2 |
| EGP | 11 | 176852 | -2 |
| SRCL | 26 | 702935 | 2 |
| Average | 20 | 429575 | 0.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $430 million. That figure was $236 million in SWAV’s case. SLM Corp (NASDAQ:SLM) is the most popular stock in this table. On the other hand Eastgroup Properties Inc (NYSE:EGP) is the least popular one with only 11 bullish hedge fund positions. ShockWave Medical, Inc. (NASDAQ:SWAV) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SWAV is 90. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Hedge funds were also right about betting on SWAV as the stock returned 2% since the end of Q2 (through 10/15) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Shockwave Medical Inc. (NASDAQ:SWAV)
Follow Shockwave Medical Inc. (NASDAQ:SWAV)
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Disclosure: None. This article was originally published at Insider Monkey.
